Sun Life Investment Management and Trust Corp. (SLIMTC) expects much slower economic growth this year due to base effects and global headwinds.

Mike Enriquez, SLIMTC president and chief investment officer, said the economy, as measured by the gross domestic product (GDP), may expand by 4.3 percent to 6.4 percent in 2023, or an average of 5.35 percent.

SLIMTC’s average growth forecast is slower than the 7.6 percent registered last year, and below the government’s target range of 6.0 percent to 7.0 percent.

Enriquez explained that slower GDP growth was mainly due to base effects and some headwinds caused by global recessionary fears.

Despite that, Enriquez said consumer growth remains “very robust” domestically, especially for non-food spending.

“We expect continued growth in consumption and capital outlay, even though global growth slowdown is expected to dampen business and consumer sentiment,” Enriquez said.

In the first quarter, the Philippine economic output grew by 6.4 percent, a sharp slowdown from 8.0 percent a year earlier.

Meanwhile, SLIMTC expects inflation to decelerate, averaging 5.0 percent in 2023. This is within the government’s outlook of five percent to seven percent, but above the target band of 2.0 percent to 4.0 percent.

Inflation decelerated further to 6.6 percent last April after hitting 8.7 percent last January, the highest in 14 years.

Amid stabilizing consumer prices, Enriquez said the Bangko Sentral ng Pilipinas is expected to be less aggressive in monetary policy tightening.

Earlier, the inter-agency Development Budget Coordination Committee (DBCC) kept its GDP target of 6.0 percent to 7.0 percent for this year and 6.5 percent to 8.0 percent for 2024 to 2028.

The DBCC, however, adjusted upwards its inflation outlook for 2023 on the back of “persisting high prices of food, energy, and transport costs.”

According to the inter-agency body tasked to set the government’s macroeconomic assumptions, inflation may average around 5.0 percent to 7.0 percent, higher than the previous assumption of 2.5 percent to 4.5 percent.

But the DBCC expects inflation to return to the target range of 2.0 percent to 4.0 percent between 2024 and 2028.